Brent climbs above $107 on hopes of Fed tapering delay

by **Cals** Mon 28 Oct 2013, 19:34

Business & Markets 2013

Written by Reuters

Monday, 28 October 2013 18:27

(28/10/13 18:11:18)

* Fed may stand pat on monetary policy at this week's meeting
* Brent oil to rebound to $107.65 -technicals

LONDON (Oct 28): Brent crude rose towards $108 a barrel on Monday, after three days of losses, amid expectations the U.S. Federal Reserve would maintain its economic stimulus at its policy meeting this week.

The U.S. central bank is unlikely to shift away from its monthly $85 billion in bond purchases at the end of its two-day meeting on Wednesday as it waits for more evidence on how Washington's budget battle has hurt the economy.

The bond purchases have spurred the U.S. economy and helped boost liquidity in commodity markets, including oil, by keeping the dollar weak versus other currencies.

Brent fell 2.7 percent last week, the biggest weekly drop in a month, as concern about higher supply and faltering demand offset signs of faster economic growth in China.

Brent for December delivery was up $1 at $107.93 a barrel by 0930 GMT. U.S. crude was up 10 cents at $97.95 a barrel.

"Expectations for the Fed's stimulus easing have now been pushed to 2014," said Olivier Jakob, analyst at Petromatrix.

"If you look at the dollar, (the tapering) has been priced in. Oil has nevertheless broken away from its correlation with equities and the dollar," he said.

Analysts say the Fed could not act for the rest of the year as data released since a partial U.S. government shutdown ended has been surprisingly weak. Even before the 16-day shutdown, job growth slowed in September.

Expectations that the Fed might start curbing its bond purchases by the end of the year had fuelled declines in the prices of some assets before investor focus shifted to the wobbly fiscal situation in Washington from late September.

Technical charts suggest Brent could rebound to $107.65 per barrel, as it has completed a five-wave cycle, according to Reuters market analyst Wang Tao.

Iran Talks

Investors are also keeping an eye on a two-day meeting of experts from Iran and six world powers on Wednesday.

Western diplomats say the meeting, scheduled to take place a week before the next round of negotiations in Geneva in November, could be instrumental in defining the outlines of any preliminary agreement on Iran's uranium enrichment campaign.

U.S. and European sanctions against Iran over its disputed nuclear programme have cut oil exports from the OPEC member by more than half, underpinning global oil prices.

Iran has not halted its most sensitive uranium enrichment work, a senior Iranian parliamentarian said on Saturday, contradicting a statement by another lawmaker last week.